How to legally rent your property in Spain

- Updated: 01/10/2013

Published: 14/07/2011

Author: Tumbit -

With the summer season in full swing, the Agencia Tributaria (Spain's tax authority) is launching a campaign to cut down on illegal property rentals. We asked Raquel Perez from
Perez Legal Group
to tell us more....

At worst, these illegal rentals involve agencies that let properties on their books without informing the owners and then pocket the income, meaning that both the rightful recipient of the rental money and the tax authority are circumvented.

However, these new measures are also aimed at bringing to book the increasing number of second homeowners who are renting their properties out and failing to declare their earnings. Newly released figures estimate that, of the 65,000 holiday homes rented every year in the Mαlaga province alone, 75% are not declared, meaning a total loss to the taxman of a breathtaking 104.8 million.

In order to recoup this money, the Agencia Tributaria has enlisted the help of the electricity companies; armed with proof of electricity consumption during periods when the offending apartments, townhouses and villas are allegedly empty, the tax authorities will be able to pursue the offending landlords.

Since so many of these holiday lets are owned by foreigners, it has been claimed that much of the problem can be attributed to ignorance. One of the Costa del Sol's English language newspapers, the Euro Weekly News, quotes an unnamed real estate agent: Although there is no excuse for people not declaring holiday home income, it can be very difficult for foreigners to find out when, where and how one is supposed to go about things. There is so much red tape involved it is often hard to know where to go for proper advice.

The good news is that it is not at all complicated to place your rental agreements on a completely legal footing:

 Firstly, for full security, your rental contract should be registered with the housing department. This means that you will have full legal protection in the event of any court case about your rental that could arise. Only registered contracts, where the landlord is completely legal in his operations and declares the rental income for tax purposes, have the full protection of the law, although in reality it is often the case that many landlords dont do this and the rental contract is valid in Court.

 Secondly, if you hire a real estate agency or management company to handle your letting, they must add 18% of VAT to the rent, which must be paid to the tax agency. These companies will normally charge around a 15% commission for their services.

 You must declare your rental income and set aside 24% of the rent as a withholding tax payable to the Spanish government every month or if you apply, every quarter.

 You should know also that you must declare this income to the UK or German tax authorities  wherever you are resident. The double taxation agreement between the two countries means that you can claim back from Spain what you have paid in the UK, so you are not taxed twice but you must declare in both countries.

 If you are a tax resident in Spain, you should add your rental income to your other income when you make your annual Spanish income tax declaration. If you register your property as a tourist letting operation, you can put down the maintenance expenses of your property as a business expense and deduct this from your tax.

Adhere to these five, very simple rules and you can enjoy the additional income that accrues from the rental of your Spanish property, secure in the knowledge that your will not receive any unwelcome communications from the tax office!

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Eh, have I understood this article correctly?
If you rent out an apartment in Spain and the tenant pays 1000 per month then
- 18% of this is VAT
- 24% is tax you pay to the Spanish government
So of the 1000, 42% is tax so you keep only 58% which is 580?
In addition to the 420 already going to the taxman, each month you will have to pay other taxes such as:
- local rates (could be between 500 and 2000 per year)
- notional letting value (could be between 500 and 1000 per year and you pay whether your property is vacant or not)
- wealth tax
- rubbish collection tax
Your tenants will be paying the phone, electric and gas bills but you will have costs such as:
- property insurance
- community fees
- possibly agency fees if you are using a property management service
So now that 580 could be down to as little as 300?
And even that 300 must be declared in your income tax and so could be taxed further?

Dan - Wed 10th Dec 2014

Suzanne : the Hacienda doesn't care about the noise you are suffering from inconsiderate Holiday lets - all this will do is (eventualy) force the owner into either stopping illegal lets; going legal or selling up. Your best bet is to speak with your Community of Residents (if you have one), or make a Denuncia aginst the owner on the grounds of excessive public noise.

Alan Stanley - Fri 18th Jul 2014

Our neighbours rent out their property (Rojales, Costa Blanca) and we have had a terrible summer due to noise and disturbance from the holiday makers. I know he is not registered and does not pay tax on the income. Can I report him anonymously, as I fear the consequences if he knows I did this!

Suzanne Stokes - Fri 18th Jul 2014

@Peter - The landlord is responsible for insuring their own contents although there is no law to say that they must cover the contents for insurance. However, the tenant will also be responsible for his own personal possessions and contents. It is worthwhile speaking to iBex Insurance who we've spoken to about this and will be able to guide through the process in more detail.

Tumbit Admin - Wed 22th May 2013

Hello,
I rent a property in Spain and wanted to know if I rent the property partly furnished who is responsible for the contents insurance..? myself the landlord or the tenant. is there a law stating anything..?
Thankyou

Peter Lancett - Wed 22th May 2013

Have you a Community of Residents you can complain to ? Also, does your neighbour still live in the apartment and just rent rooms, or live elsewhere ?

Tumbit - Admin - Wed 24th Apr 2013

Hi I own/live in a residential apartment in Mallorca. My neighbour rents out to workers for six months in the summer. For the last four years we have had problems with noise, as they come in early hours of the morning. A different lot every year. I have been to the police, administrator, owner and president, but to no avail. This has just started up again this year, and we have been woken up at 5 every morning. I want to know is it legal to rent in a residential block? Also I am thinking of reporting her to the tax people, as I am sure she isn't. I am not a nasty person, but need my sleep.